Investors glimpse resolution as legal fog clears over Pearl's bid

It has been a long, tortuous process, but finally shareholders in insurance group Resolution can see light at the end of the tunnel.

More than three months ago Resolution agreed a 720p-a-share, £4.9bn takeover by rival Pearl. The deal followed an extended takeover saga involving not just Pearl and Resolution, but Friends Provident and Standard Life.

But in January, completion of the takeover was postponed over legal issues, then at the start of February the timetable was extended by another three weeks as Pearl needed more information from Resolution involving the distribution of capital from its life companies. These details needed to be passed on to the Financial Services Authority, the City regulator. There was yet another delay a week ago, prompting fears the deal could fall through entirely even at this late stage.

But yesterday the two sides said they were confident they could supply the bulk of the required information by next Friday. It would normally take the FSA three months to give final approval, but both sides expect a decision much sooner than that. Resolution's shares, which had fallen as low as 661p this week, rallied 20.5p to 690p.

Elsewhere the market ended the week on a gloomy note. Once more Wall Street was the main influence, falling more than 200 points by the time London closed after a downbeat Chicago business survey reignited recession fears. On top of that there were record losses from insurer AIG and worries about the proposed bail out of bond specialist Ambac. So the FTSE 100 fell 81.4 points to 5884.3. The FTSE 250 index was 162.9 points lower at 10067.9.

Banks were once again among the main fallers, with Royal Bank of Scotland and Barclays both lower after a downgrade from analysts at Morgan Stanley. RBS lost 17p to 385p and Barclays dropped 23.25p to 477.25p.

Mortgage bank HBOS was down 31.5p to 603.5p. Traders pointed to continuing concerns about its loan exposure, and a survey from rival Nationwide showing a fourth successive monthly drop in house prices did not help.

There was a late rumour that Lloyds TSB, down 10p to 453.5p, was about to pounce on Bradford & Bingley, up 17.75p to 225p. But traders said the price rise could also be due to B&B holding an investor roadshow.

Directories group Yell continued to suffer in the wake of a warning from US rival RH Donnelley this week about slowing growth, down another 23.25p to 219.25p. Investment group Templeton Global Advisors, a subsidiary of Franklin Resources, has sold 15m Yell shares to take its stake down to 3.16%.

Outsourcing group Capita slipped 26.5p to 656p as profit takers moved in after its 19% rise in underlying full year profits, while Next slipped 16p to £12.89 despite suggestions from analyst Tony Shiret at Credit Suisse that it might be a bid target for Marks & Spencer, up 0.75p at 402.75p. He wrote: "We have reviewed possible takeout scenarios and in particular considered the merits of a scenario in which Next is bought by Marks & Spencer. M&S have never publicly expressed an interest in Next, but we believe this would significantly enhance M&S's strategic prospects. We believe M&S could clearly pay a significant premium for Next with the benefit of synergies and the use of some of the enlarged group's borrowing capacity." As a result, he has a £20 a share price target for Next.

Rat catcher and parcels group Rentokil edged higher after Thursday's share price plunge in the wake of its second profit warning in as many months. It ended up 2.9p at 83.4p. Fund management group Schroders, one of a number of companies to be the subject of takeover speculation during the week, added 18p to 958.5p as Morgan Stanley raised its rating from underweight to equal weight with an £11.60 price target.

In the mid-cap sector, the biggest faller was accident claim handling business Helphire. It slumped 118.5p to 172p as a 7% rise in half-year profits came in below expectations, with analysts concerned by higher costs and growing debt levels. Even news that two directors were buying shares yesterday failed to halt the decline. James Hamilton at Numis said: "We are cutting our target price from 465p to 300p, but expect this to go lower in the short term. We envisage cutting our [full year profit] numbers in the order of 15-20%."

Bluetooth specialist CSR, which issued a disappointing update this week, fell another 4.75p to 319.5p after a negative note from ABN Amro. It said: "Given deteriorating demand and rising inventories, we believe CSR's first half revenue guidance is still ambitious. With high risks of another profit warning, we downgrade the stock to hold."

Radio group GCap Media slipped 0.5p to 190.75p as it rejected an improved £333m bid from rival Global Radio, while merchant bank Close Brothers fell 91p to 659p after it said it was no longer in takeover talks.

Finally, online bookseller ArgentVive closed at 50p, up 10%, as its deputy chairman, entrepreneur Charles Denton, made a move to take it private.

Submarine warfare

Oil services group Expro may be the subject of a bidding war. Yesterday it revealed a takeover approach, and its shares soared 332.5p to £12.59. Expro is an attractive target because of its technology, with the jewel in the crown being its AX-S system for deep sea exploration. AX-S is a couple of years away from full development, but this makes it a good time for a predator to pounce. Schlumberger, Baker Hughes and GE are possible bidders, along with private equity groups. First Reserve is active in the sector and is currently buying Abbot in the UK. Failed Abbot bidders 3i and Candover could also be interested. Analysts set a takeout price of £14 to £15, valuing Expro at £1.5bn.